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Tuesday, January 4, 2011

Social Insecurity

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I can't seem to leave some news stories alone...

Do The Math

This is something that I have long suspected, but I never actually looked at it very close before. Well, let's take a look...

First of all, to keep things simple, I have used the figures from the article that a couple paid $114,000 in Medicare taxes and another $614,000 in Social Security taxes over their careers. I have assumed that the people will retire after paying into the systems for 45 years, that is to say that they worked and paid taxes from about age 20 to age 65. Also, for the sake of simplicity, I simply divided the about amounts by 45 years to get an average annual payment. These come to $2,533.33 per year for Medicare and $13,644.44 for Social Security. Next, I used a savings calculator located at to do the calculations and used the default of a 5% return rate. The really iffy part is that I assumed that the tax rate would be 0% since this is a medical and retirement savings account. Finally, I have stopped paying interest on the money at the end of the 45 years when you start to withdraw the money from the accounts.

Here we go...

For Medicare, if you saved the $2,533.33 per year for 45 years at 5% interest, you would have a total of $404,573. That's well in excess of the $355,000 the article states you will need for health care.

For Social Security, if you saved the $13,644.44 per year for 45 years at 5% interest, you would have a total of $2,179,019. The article says you'll only need $555,000.

These simple figures identify one major issue:

The big government Marxist way of doing things is horribly inefficient.

But, let's carry our math a little farther...

According to the World Bank, the average life expectancy in the US is just over 78 years. That means you will live about 13 years after you retire and start drawing the above benefits. We'll call it 15 years to make the math easier.

For health care, you would have about $27,000 a year to spend. For retirement benefits, you would get about $145,200 a year. That's a total of more than $172,000 a year.

Now, most people by this age will have paid off their mortgage, so living expenses come down to maintenance, utilities, insurance, and taxes. Let's call that about $1,200 a month. They may have a car payment, and we'll use $750 a month. Clothing and food should be around $750 a month. And for everything else, let's toss in another $1,000 a month. Yes, these figures are probably high, but I would rather error in that direction than come in too low. This comes to $3,700 a month, or $44,400 a year. That leaves our retired couple $127,600 a year to spend for health care and as "mad money".

The obvious thing—the gorilla in the room, if you like—is that we are paying far too much for far too little. Investments and savings made through the private sector will provide bigger returns for smaller cash costs.

So, how do we fix it?

The problem is that the Marxists have promised people for decades that Medicare and Social Security will take care of them. No matter what your politics might be, the right thing to do is to make good on those misguided promises. Yes, it will be hard, and it will be costly, but it's the right thing to do.

I would suggest some kind of a sliding scale. People over a certain age simply keep paying what they do now and get full coverage when they retire. People under that age get an individual account in the private sector with the dollars paid in so far plus interest deposited, and all future payments go there, too. New people entering the system get the private account from the start. There would be a spike in the costs to the government to pay for the mistakes made in the past, but then the costs would actually go down with time. And the economy would benefit from the extra money in the system.

We pay for this with the money saved by the elimination of the entire Social Security Administration and a few dozen other agencies whose jobs just ended because government gets out of the business.

And before someone asks, yes, this should be mandatory, just like current Medicare and Social Security taxes.

Keep Loving!

Melodee Aaron, Erotica Romance Author
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